By Andrea Shalal-Esa
NEW YORK Nov 28 Lockheed Martin Corp
and the Defense Department are nearing agreement on a
long-delayed contract for a fifth batch of F-35 fighter jets,
the Pentagon's chief weapons buyer told Reuters on Wednesday.
"I think we're getting close," Defense Undersecretary Frank
Kendall told Reuters after a speech to an investor conference
hosted by Credit Suisse.
Kendall said he had "a very positive meeting" on Tuesday
with Lockheed President Marillyn Hewson about a range of issues,
including the $396 billion F-35 program, the Pentagon's largest
Hewson will become the company's CEO in January after the
company forced out Christopher Kubasik, who admitted to having
an affair with a subordinate.
Lockheed spokeswoman Jen Allen declined comment on Hewson's
meeting with Kendall. "We do not discuss customer meetings and
consider them proprietary," she said.
Lockheed, the Pentagon's largest contractor, and its
suppliers are already building the fifth batch of planes under a
preliminary contract, but the two sides have been struggling to
finalize the terms of the deal since last December.
"The two sides have been arguing over what the plane should
cost for the better part of a year. It appears they have now
agreed on a price that is midway between their original goals,
which means a significant reduction in the cost of each plane
from the previous contract," said defense consultant Loren
Thompson, who has close ties to Lockheed.
Thompson said Hewson's increased engagement in the F-35
negotiations had helped defuse tensions that had mounted between
the company and the Pentagon over the past year.
In September, Air Force Major General Christopher Bogdan,
who is moving up to head the F-35 program next week, said ties
between Lockheed and the U.S. government were "the worst" he had
ever seen in his years working on big acquisition programs.
Hewson told analysts earlier this month that the F-35
program would be one of her top priorities in her new job. "We
won't miss a beat on F-35," she said at the time.
Hewson is due to speak at the Credit Suisse conference on
Agreement on the terms would free up additional funding for
early work on a sixth set of planes, which the company has been
funding on its own for some time.
Lockheed warned investors last month that it faced a
potential termination liability of $1.1 billion on that sixth
batch of planes, unless it received additional funding by year
Lockheed received some initial "long-lead" funding for
advanced procurement of materials for the planes, but that money
ran out a while ago.
The Pentagon has refused to release any more money for the
sixth batch of planes until the two sides resolve their
differences and sign a contract for the fifth batch of planes
after nearly a year of negotiations.